Money and Its Impact on Infrastructure Management and Acquisition

So, moving on to the third part of this discussion today, we are going to talk about money and the impact of money and finance on infrastructure acquisition and management.

One of the fundamental problems that we have in western society particularly is that infrastructure is taken for granted. Transportation and water utility infrastructure are “just there” as far as people are concerned.

And the service levels for consumers are “generally” okay. And as we were discussing in the Risk section, users and consumers don’t see the hidden risks. And probably actually to be honest, and that’s the two graphics there.

They are more concerned about their mobile phone plan, streaming data and their unlimited Wi-Fi than they are about the transportation and water utility networks.

So the issue we have as infrastructure managers is how do we express the issues and the risks around the funding of infrastructure and the lifecycle management of infrastructure to our decision makers and our communities when it’s just there and it doesn’t seem to matter?

And clearly our current methods aren’t working as well as they need to and the competition is fierce. And the mobile phone companies are particularly creative in the way they sell their goods and services.

We’re not. So, we’re going to have a quick look how you might change that conversation.

The world needs more infrastructure

Probably we’re going to start with just the review of what the world needs. The world needs a lot more infrastructure.

During the period 2013-30, again from The Economist here. Building on worked on by McKinsey Institute—$57 trillion of new infrastructure needed. That’s around, in 2013 it was about 2.7 trillion a year or about 4% of the world GDP. The estimated spend worldwide is a trillion dollars per year global shortfall for the next 17 years.

And so how do we pay for it? Existing financing is already stretched and new infrastructure also creates ongoing operation and maintenance costs.

And so just looking at the graphics there—roads, 16%; water, 11.7%; power, 12.2%, but it’s a big chunk of it, isn’t it?

Worldwide infrastructure funding gap

So what to do? And this is 1 trillion dollars a year funding gap and it’s getting bigger. That is equal to the South Korean GDP per year.

And that gap is growing fast. So what do we do? How we fund it? It’s an ongoing and worldwide problem.

Just quickly looking at International Investment in Roads as the percentage of GDP. And this is from 2011 data from the Economist again.

And Australia with their status 1.25%; Canada 1.2%; New Zealand 0.7%. We’ve come up a little bit since we’ve been funding some big road highway projects, expressways and things like that last two years.

But US was 0.5% of GDP back in 2011. So not investing as much as compared to other countries at that time.